Tuesday, May 18, 2010

The Fastest Follower is the innovation winner

In our innovation circles, we like to celebrate the pioneers. They are the folks that establish the trail and go where no one has gone before. We highlight their advancements and hold up their accomplishments. But what often goes unsaid or unnoticed is that many pioneers die right on the cusp of success. Who are the ultimate winners? The Fastest Followers (tm).

Does this mean we as innovators should abandon the concept of "Blue Oceans" and wait for others to move? Absolutely not - but it should inform our strategies. Let's think about one exemplar of innovation - Google, and one pioneer that made the search space possible - Yahoo. I can remember when Yahoo was the big news. Yahoo was going to take over the internet and Google was an interesting sideshow. What Yahoo did was establish that there were OPPORTUNITIES in the web space for search engines and portals. What Yahoo also did was to carve out a business model based on a model of growing and capturing more and more content - even creating its own content. The argument at Yahoo was that content was a winner. But what wasn't clear was the business model.

Google quickly followed and staked out a search engine strategy based on advertising, not content. Since Yahoo went first and established the search engine market viability, Google didn't have to argue about whether or not the "Blue Ocean" existed. It had been established. Now the question was: what was the right operating model and scale? Google might not have become the innovative giant and money making machine without the pioneer, Yahoo, which has struggled to find its way ever since.

Note that there were others who followed the pioneer - Ask, Bing, etc, but in any markets or opportunities it is typically the competent Fastest Follower who wins.

What does it take to be the Fastest Follower? A lot of the skill resides in what unsurprisingly looks like innovation. First, you have to spot trends, understand them and react to them. Sergey and the boys could have looked at Yahoo and said, well, they've locked up the market. Or they could have said, there's no market there at all. But what they did was watch the trend line of the growth in the web and recognized an opportunity, and moved quickly to exploit that opportunity.

Second, have a different idea. They weren't the first, so they didn't have to explain the market or establish its viability. Instead, they had to have a more compelling idea than the pioneer. Often the pioneer is so exhausted from establishing that a market exists and has been so close to the market for so long that they don't understand the signals from the market they helped create and validate.

Third, experiment and learn faster than the other guys. Ask and a number of other search engines existed and were launched a roughly the same time. Any one, or any several of them could have grown quickly like Google and could have contended with Google. There's no law that says we should have only one significant search engine. After all Google is a distant second in China. Google experimented to understand the best search engine technology, the best way to monetize the solution, and the best ways to extend the "find and share" model. At one point they were creating new "beta" products at such a clip that people would line up to tryout new Google products that weren't commercial and might never be. Yahoo and others took a more traditional enterprise model development strategy and missed a lot of the excitement of the creation.

We all talk about the strategic goals of new entrant, fast follower and late follower, as if any "Fast follower" is equivalent. They aren't. While we innovation purists want all of our customers to crack open the new Blue Oceans and enter new disruptive markets and create products that meet unarticulated needs, many times the most successful innovators are those who have clearly attuned antennae for market trends and signals, who understand the markets a pioneer opens are more rich and robust than the pioneer does, and who can rapidly create and test business models and co-create with the customers in that market.

Eventually, most businesses would like to be fast followers, but in reality most want to enter safe, proven markets and battle over the table scraps of the pioneers and the Fastest Follower. In most cases history will show that the Fastest Follower - GM vs Ford, or Apple in just about any of its products, or MySpace versus Facebook - always wins, and they always have the characteristics of the "Fastest Follower" - better trend spotting and market signal reception, better ideas based on customer needs, and better prototyping and customer interaction. These are the hallmarks of good innovators. Clearly it's the case that all Fastest Followers are innovators, but there are many innovators who prefer to be pioneers.

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